This paper investigates the effectiveness of monetary-fiscal policies interaction on price and output growth in Nigeria. The dynamic correlations of variables have been captured by the analyses of impulse response and variance decomposition. From innovation analyses, the results suggest that the policy variables money supply and government revenue have more positive impact on price and economic growth in Nigeria specifically in the long run, thus some time with lag. Although monetary and fiscal policy variables have a dominant effect on economic activity, it is clear from this study that economic activity is dominated by its own dynamics in most of the periods. The estimates presented in this paper suggest that both monetary and fiscal policy exert greater impact on real GDP and inflation in Nigeria. Overall, it is evident that the impact of policy is sorely depending on the policy variable selected, although some policy variables are considered to be more beneficial to the social and economic development.
Cointegration Impulse Response Variance Decomposition VEC Model